The board of Cathay Pacific Group has approved a restructuring plan for the embattled Hong Kong carrier on Oct 21.
Under the plan, Hong Kong Dragon Airlines (Cathay Dragon), a wholly-owned subsidiary of the company, will cease its operations with effect from today.
The group will seek regulatory approval for a majority of the airline’s routes to be operated by Cathay Pacific and another wholly-owned subsidiary Hong Kong Express Airways.
About 8,500 positions across the group – including Cathay Dragon – will be cut. The number represents some 24% of the group’s total headcount of 35,000 employees.
Of these positions, some 5,300 Hong Kong-based employees will be made redundant in the coming weeks. Another 600 employees are based outside of Hong Kong.
The remaining 2,600 positions are currently unfilled, due to cost reduction initiatives including a hiring freeze and the closure of certain overseas bases.
The restructuring will cost the airline some HK$2.2 billion ($385.3 million).
In connection with the restructuring, a deferred tax asset of HK$1.3 billion will be impaired.
In an SGX filing, the company said its cash losses remain at HK$1.5 to 2 billion per month, and that the restructuring will lead to a reduction of some HK$500 million in monthly cash outlay by the group in 2021.
In its outlook, the company added that the “the most optimistic scenario it can responsibly adopt” is that it will be operating at “well under 50%” of the passenger capacity in 2021 compared to 2019 in view of an uncertain future and the slow recovery of the aviation industry.
On June 9, Cathay Pacific outlined a plan to raise HK$39 billion from the Hong Kong government and shareholders.
See: Cathay Pacific plans $7.0 bil government-backed recapitalization and Hong Kong to lead Cathay Pacific's HK$40 bil bailout package : SCMP
